' By this order I will dispose of application under Order VII, rule 11, C.P.C. Filed by defendant on the ground that the plaint being an application under section 20 of Arbitration Act, 1940 does not disclose any cause of action and is liable to be rejected with maximum compensatory costs as the suit on the face of it appears to be frivolous, mala fide and unwarranted under the law.
2. The plaintiff filed counter-affidavit by stating that he had filed Suit No.1183 of 2002 before this Court for dissolution of partnership, rendition of account permanent injunction, declaration and recovery of amount but the suit was stayed under section 34 of the Arbitration Act on the application of defendant, therefore, he has filed the present suit for appointment of Arbitrator.
3. The facts of the suit are that on 4-11-2003 the plaintiff filed the application under section 20 of the Arbitration Act with the following prayer:-- "It is, therefore, prayed that this Honourable Court be pleased to direct the respondent to file arbitration agreement and appoint Arbitrator to resolve the disputes regarding dissolution of Partnership, Rendition of account and recovery of amount due and found by the petitioner against the respondent."
4. Before the present suit, on 22-11-2002 the plaintiff filed the Suit No.1183 of 2002 for dissolution of partnership, rendition of account, permanent injunction, declaration and recovery of amount against the defendant. The defendant filed application under A section 34 of the Arbitration Act.
The Court after hearing the parties' counsel stayed the suit and parties were directed to refer the case to the Arbitrator in accordance with the arbitration clause contained in the Partnership Deed.
It appears that the parties did not approach the Arbitrator, therefore, the plaintiff has filed the present application/suit.
5. In the present case the dispute which is required to be referred to the Arbitrator is same which was already agitated in Suit No.1183 of 2002 in which the order had already been passed directing the parties to refer their dispute to the Arbitrator and the proceedings of the suit had been stayed under section 34 of the Arbitration Act. It is further pointed out that the plaintiff had already invoked the Arbitration clause by serving notice dated 25-6-2003 on the defendant by which he appointed his Arbitrator and requested the defendant to concur with the said Arbitrator, as such, the plaintiff has already invoked the provisions of section 8 of the Arbitration Act. For invoking the provisions of section 20 of the Arbitration Act, it is essential that three main conditions are to be satisfied: (i) arbitration agreement has been entered into before filing the suit concerning the subject-matter of the agreement; (ii) the differences or disputes have arisen between the parties to which such agreement applies; and (iii) proceedings under sections 3 to 9 of the Arbitration Act had not commenced.
6. The Scheme of Arbitration Act is that the dispute between the parties who entered into an agreement of arbitration should be decided by one or more persons who are called to be Judges in the said dispute and not by a regular or ordinary Court of law. The scheme further envisages that the decision of the said Arbitrators is binding upon the parties whether they agree to the decision or not and they cannot object to the decision either upon law or fact if the award is good on the face of it.
' Further the arbitration in substance oust jurisdiction of Court except for purpose of controlling Arbitrator and preventing misconduct and for regulating procedure after award. The Honourable Supreme Court Pakistan in the case of National Construction Co. v. WAPDA PLD 1987 SC 461 at page 465 has observed as under:-- "The general principle underlying the concept of arbitration as translated in the scheme of the Arbitration Act is that, as the parties choose their own arbitrator to be the Judge in the dispute between them, they cannot when the award is good on the face of it, object to his decision, either upon C law or the fact. In other words an arbitration in substance, ousts the jurisdiction of the Court, except for the purpose of controlling the arbitrator and preventing misconduct and for regulating the procedure after the award. It is well-settled that the Court has no right to review the award or to consider it."
7. A perusal of Arbitration Act, 1940 reveals that there are 3 modes of arbitration: (1) Arbitration without intervention of Court; (2) Arbitration with intervention of Court where there is no suit pending; and, (3) Arbitration in a suit pending before Court. The first category of arbitration is provided under Chapter II of the Act, which contains sections 3 to 19. The second category of arbitration is available in Chapter III which contains only one section, that is, section 20; and, Chapter IV of the Arbitration Act deals with the 3rd category of arbitration which contains sections 21 to 25. Section 20 of the Act is available in Chapter III, which along with its heading reads as under:-- "Chapter III ' Arbitration with Intervention of a Court where there is no suit pending section 20.
20. Application to file in Court arbitration agreement.--- (1) Where any persons have entered into an arbitration agreement before the institution of any suit with respect to the subject-matter of the agreement or any part of it, and where a difference has arisen to which the agreement applies, they or any of them, instead of proceeding under Chapter II, may apply to a Court having jurisdiction in the matter to which the agreement relates, that the agreement be filed in Court.
(2) The application shall be in writing and shall be numbered and registered as a suit between one or more of the parties interested or claiming to be interested as plaintiff or plaintiffs and the remainder as defendant or defendants, if the application has been presented by all the parties, or, if otherwise, between the applicant as plaintiff and the other parties as defendants.
(3) On such application being made, the Court shall direct notice thereof to be given to all parties to the agreement other than the applicants, requiring them to show cause within the time specified in the notice why the agreement should not be filed.
(4) Where no sufficient cause is shown, the Court, shall order the agreement to be filed, and shall make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise, or, where the parties cannot agree upon an arbitrator, to an arbitrator, appointed by the Court.
(5) Thereafter the arbitration shall proceed in accordance with, and shall be governed by the other provisions of this Act so far as they can be made applicable."
8. A perusal of above provisions of law reveals that section 20 is complete code in respect of moving an application before the Court for appointment of arbitrator, grounds on which the application can be filed, form of application so as to make it a suit, issuing notice to parties interested or claiming to be interested to be plaintiff or defendant, procedure of filing an arbitration agreement before the Court, manner in which arbitrator or arbitrators are appointed, for arbitration proceedings; after appointment of arbitrator or arbitrators, applicability of other provisions of the Act so far as they could be made applicable to the arbitration proceedings.
9. Before moving the Court for appointment of arbitrator certain conditions are required to be fulfilled they are; (1) There should be an arbitration agreement between the parties executed between them before the institution of any suit with respect to the subject-matter of the agreement, (2) There should be dispute between the parties of such agreement, and (3) the parties have not invoked the provisions of Chapter II viz. Sections 3 to
19. If above three conditions are fulfilled then the party may move an application in writing before the Court which shall be registered as a suit and then notice is required to be issued to the parties interested or claiming to be interested to be plaintiff or defendant. After registering the application as suit, a notice is required to be issued to all the parties to the agreement other than the applicant requiring them to show cause within the time specified in the notice as to why the agreement should not be filed. After serving the notice if no sufficient cause is shown to the Court then an order is to be passed that the agreement be filed and then the Court is required passed an order of reference to the arbitrator appointed by the parties or where the parties cannot agree upon any Arbitrator to appoint an Arbitrator. Once such orders are passed then arbitration proceedings start which should be governed by the other provisions of the Arbitration Act so far as they could be made applicable. Once the above conditions are fulfilled, then the purpose of section 20 of Arbitration Act is achieved and the application stands disposed of.
10. After passing the award by the Arbitrator then the same is required to be filed in the Court within the meaning of section 14 of the Arbitration Act and then further proceedings would be conducted by the Court under the other provisions of Chapter-II.
11. It will be noticed that the heading of the Chapter-III reveals that provisions of section 20 are applicable when there is no suit pending. However, perusal of section 20 reveals that no such impression can be gathered from the wordings of the said section. If that is so then what was the need of giving such heading to the section 20. I am conscious of the fact that the heading of the Chapter would not govern the clear and unambiguous words appearing in the section. However, there is conflict of opinion in the authorities of various superior Courts on applicability of heading.
One set of the authorities is to the effect that heading of the Chapter is like preamble of a Statute where as the other opinion is contrary to the above proposition by taking the plea that the heading of the section or Chapter is given by the draftsman of the statute and it is not voted in the Parliament. Nevertheless, the heading of the section or Chapter can be taken into consideration while interpreting the actual meaning of the section or heading of the Chapter under which various sections are enacted. For that, purpose entire scheme of the Arbitration Act is required to be examined to arrive at the conclusion whether it is essential that for invoking the provisions of section 20 of the Arbitration Act no suit should be pending in any Court of law.
12. The scheme of the Arbitration Act is that the parties should refer their disputes to the arbitrators for decision out of Court where the technicalities of law, evidence and other procedural hurdles are not applicable to the proceedings before the arbitrator. These proceedings are summary in nature with a view to quickly dispose of and settle the disputes between the parties without going into detail procedural hurdles. Through this enactment, the parties have been encouraged to settle their disputes without intervention of Court and for that purpose sections 3 to 19 have been made in Chapter-II of the Arbitration Act. If the parties do not agree on any arbitrator, arbitrators, or empire, only then the Court has been given power to settle that dispute and to appoint arbitrator, arbitrators or empire or to remove such persons in the circumstances mentioned under various provisions of Chapter-II. The Courts function starts when award is passed by the arbitrator to make it a rule of the Court. The Arbitration Act further facilities the parties .To get their disputes settle through the Arbitrator even if they file the suit when there is no agreement of arbitration between the parties by making provisions in Chapter-IV and its heading has been given "Arbitration in suits".
If the parties of arbitration agreement did not go to arbitrator and if the party of the said agreement files a suit then in such case under section 34 of the Arbitration Act the other party has been given right to move the Court to stay the proceedings of the suit so that the parties may take the dispute to the arbitrator under the arbitration agreement. Thus, if a suit is filed by a party to the arbitration agreement then the other party has been given right to get the matter stayed under section 34 of the Arbitration Act. In such a situation if the said party is allowed to move an application under section 20 of the Arbitration Act then there will be duplication of the proceedings.
It is the intention of the Legislature that the matter in dispute of the arbitration agreement, should be decided by the parties agreed arbitrator or in case their disagreement on the arbitrator then the Court has been given power to appoint such Arbitrator within the meaning of section 8 of the Arbitration Act. If the situation is examined in the above manner then there will be no hesitation in holding that if a suit is already pending then the parties have been given right to approach the said Court under section 34 of the Arbitration Act. The purpose of section 34 and section 20 of the Arbitration Act is one and the same i.e. To refer the matter to the arbitrator. As such, the provisions of section 20 would not be applicable to such case as alternate, adequate and efficacious remedy has already been provided to the parties in the shape of section 34 of the Arbitration Act. This can further be visualized from the position when the parties have initiated proceedings under Chapter- II of the Arbitration Act then the provisions of section 20 are not applicable for the simple reason that the purpose of invoking the provisions of Chapter-II and section 20 is identical and similar in nature i.e. Appointment of arbitrator. A Division I Bench of Andhra Pradesh in the case of Venkata Surya Rao v. Venkata Rao AIR 1963 AP 286 has observed that in order to attract the provisions of section 20, apart from other conditions, it was found necessary that the proceeding under Chapter-II must not have been started. This Court in the case of C.T.I., Corpn. v. Trading Corporation, Pakistan Limited (1987 CLC 2063) has also formed same opinion by holding that one of the requirements of maintainability of application under section 20 is that the proceedings under sections 3 to 19 of the Act had not commenced.
12-A. After considering the various provisions of the Arbitration Act, I am of the considered view that the section 20 will not be applicable in the situation where a suit is pending before the Court of law between the parties of arbitration agreement. Reference is invited to the case of Venkata Surya Rao (supra). As such the heading of the section correctly interpret the intention of the Legislature.
Thus, in the peculiar circumstances of the law a benefit can be taken from the heading of the Chapter-III. Thus, apart from above three conditions, if a suit is pending between the parties to arbitration agreement then section 20 of the Arbitration Act will not be attracted.
13. In the present case it will be noticed that the plaintiff had already filed Suit bearing No.1183 of 2002 in which the defendant filed an application under section 34 of the Arbitration Act, therefore, the suit was stayed and the parties were directed to refer the matter to the arbitrator. Thus, the said suit has simply been stayed, as such, it is deemed to be pending till the parties refer the matter to the arbitrator. Once the matter is referred to the arbitrator then the suit would achieve its purpose. If the parties do not go for arbitration then the suit will be deemed to be pending. In the latter case the parties had right to approach the Court for revival of the suit or for vacating the stay order so that the suit may proceed in accordance with law.
14. In the present case, it is an admitted position that the parties have not referred the matter to the arbitrator because of the non-co-operation of the defendant, though the plaintiff was pursuing to appoint the Arbitrator and for that purpose the plaintiff had already sent a notice dated 25-6-2003 to the defendant by which he appointed his arbitrator and requested the defendant to concur with the said arbitrator but the defendant did not reply to the notice or took any steps to accept the said arbitrator so that the matter might be referred to the said arbitrator. It is an admitted position that the arbitration agreement does not specify the number of arbitrators or the mode of their appointment, therefore, by virtue of section 3 of the Arbitration Act, the First Schedule attached to the Arbitration Act will be applicable under which the matter is to be referred to a sole Arbitrator with the consent of the parties. Under section 8(1)(a) of the Arbitration Act if the parties do not agree to the appointment of the arbitrator, then a notice is required to be given to the party to consent or concur the- appointment and after 15 days of the service of notice if the party does not concur to the appointment of the arbitrator then the Court may on the application of a party after giving notice and hearing the other party appoint an arbitrator to make an award on reference and then the said arbitrator is deemed to have been appointed by consent of all parties.
15. The plaintiff had already sent a notice dated 25-6-2003 to the defendant to concur on the appointment of his arbitrator, as such, the proceedings under Chapter-II had been initiated by the plaintiff. Further the Suit No.1183 of 2002 is already pending as such the provisions of section 20 of the Act are not attracted in the circumstances of the present case.
16. Under these circumstances if the plaintiff has any grievance then he should file proper application in the Suit No.1183 of 2002, for vacating the stay order and revival of the suit for decision according to law or move an application under Chapter-II of the Arbitration Act for appointment of Arbitrator. However, in any case the suit in the present form is not maintainable as it is barred under section 20 of Arbitration Act. Consequently, the application is allowed. The plaint being application under section 20 of the Arbitration Act is rejected under Order VII, rule 11, C.P.C.
Plaint rejected.